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Inventory Forecasting: Why It’s Different For Your Subscription Business

The Balancing Act

The balancing act between growing your sales revenue and inventory management is crucial for obtaining customer satisfaction. If your sales unexpectedly boom in a particular month (woohoo!) but you don’t have the inventory to back them up then you’re looking at a boom in customer support inquiries shortly to come. We’ve all been there. Then of course the inverse scenario is getting a little purchase order happy when you haven’t met sales projections. You really thought the berry scented perfume was going to be a hit – so you just doubled your order. 

Not that anyone is just winging it quite like this (well maybe some of us are and will quickly learn our lesson) but the nuances of this balancing act are real and the whole of operational success relies on your inventory forecasting formula.

The Formula

To properly forecast inventory you need to have a good understanding of past sales and your trends in seasonality – do you have peaks or valleys in demand in any particular part of the year? Sublytics clients have the benefit of a built in revenue forecasting report that ties very closely to the inventory forecasting report – but if you’re pulling sales velocity manually you will want to consider your sales volume for the past year divided by your number of days in stock.

Subscription vs One-time Sales

Inventory forecasting for subscription boxes presents the need for a deeper understanding of customer retention and behavior. Where forecasting based on previous one-time sales is straightforward in looking at the sales for a particular month, subscription inventory forecasting must consider the plan type that you offer, is it prepaid or pay as you go? Is it monthly, quarterly, or custom? Can your customers skip or swap boxes or individual products within a box on any given cycle? We need to look at all of these options and patterns in the previous period before accurately determining your business’ inventory needs. The other factor in the subscription eCommerce world we live in is churn. Your Customer Lifetime Value and Churn Rate may look very different if you have a view into active vs passive churn. Sublytics clients recover up to 20% of their revenue through testing strategic Dunning strategies to recover subscribers who have passively churned – revenue and inventory you could have easily overlooked without the correct tools. If you feel like you’re forecasting with blindspots in any of these areas – get in touch with us today. Sublytics is the analytics platform built specifically for the subscription industry. 

 

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